Scribd Logo
Upload

Welcome to Scribd!

  • 56 views

    Multiple Step

    Uploaded by

    Merza Dyan
    This document discusses different formats for financial statements used by merchandising companies. It describes a multiple-step income statement for PW Audio Supply that calculates gross profit, income from operations, results of nonoperating activities, and net income in separate sections. It then explains that a single-step income statement combines all revenues and expenses into two categories and directly calculates net income. The document concludes by noting that merchandising companies report inventory as a current asset on the classified balance sheet.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Multiple Step

    Uploaded by

    Merza Dyan
    56 views1 page
    This document discusses different formats for financial statements used by merchandising companies. It describes a multiple-step income statement for PW Audio Supply that calculates gross profit, income from operations, results of nonoperating activities, and net income in separate sections. It then explains that a single-step income statement combines all revenues and expenses into two categories and directly calculates net income. The document concludes by noting that merchandising companies report inventory as a current asset on the classified balance sheet.

    Original Title

    multiple step

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses different formats for financial statements used by merchandising companies. It describes a multiple-step income statement for PW Audio Supply that calculates gross profit, income from operations, results of nonoperating activities, and net income in separate sections. It then explains that a single-step income statement combines all revenues and expenses into two categories and directly calculates net income. The document concludes by noting that merchandising companies report inventory as a current asset on the classified balance sheet.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    56 views1 page

    Multiple Step

    Uploaded by

    Merza Dyan
    This document discusses different formats for financial statements used by merchandising companies. It describes a multiple-step income statement for PW Audio Supply that calculates gross profit, income from operations, results of nonoperating activities, and net income in separate sections. It then explains that a single-step income statement combines all revenues and expenses into two categories and directly calculates net income. The document concludes by noting that merchandising companies report inventory as a current asset on the classified balance sheet.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    c05AccountingForMerchandisingOpe227 Page 227 11/30/10 4:03:55 PM user-s146 /Users/user-s146/Desktop/Merry_X-Mas/New

    Forms of Financial Statements 227


    Illustration 5-13
    PW Audio Supply, Inc. Multiple-step income
    Income Statement
    statement
    For the Year Ended December 31, 2012

    Sales revenues
    Sales revenue $480,000
    Calculation Less: Sales returns and allowances $12,000
    of Sales discounts 8,000 20,000
    gross profit Net sales 460,000
    Cost of goods sold 316,000
    Gross profit 144,000
    Operating expenses
    Salaries and wages expense 64,000
    Utilities expense 17,000
    Advertising expense 16,000
    Calculation Depreciation expense 8,000
    of income Freight-out 7,000
    from Insurance expense 2,000
    operations
    Total operating expenses 114,000
    Income from operations 30,000
    Other revenues and gains
    Interest revenue 3,000
    Gain on disposal of plant assets 600 3,600
    Results
    of Other expenses and losses
    nonoperating Interest expense 1,800
    activities Casualty loss from vandalism 200 2,000
    Net income $ 31,600

    Single-Step Income Statement


    Another income statement format is the single-step income statement. The state-
    ment is so named because only one step—subtracting total expenses from total
    revenues—is required in determining net income.
    In a single-step statement, all data are classified into two categories: (1) revenues,
    which include both operating revenues and other revenues and gains; and (2) ex-
    penses, which include cost of goods sold, operating expenses, and other expenses
    and losses. Illustration 5-14 (page 228) shows a single-step statement for PW Audio
    Supply.
    There are two primary reasons for using the single-step format: (1) A company
    does not realize any type of profit or income until total revenues exceed total ex-
    penses, so it makes sense to divide the statement into these two categories. (2) The
    format is simpler and easier to read. For homework problems, however, you should
    use the single-step format only when specifically instructed to do so.

    Classified Balance Sheet


    In the balance sheet, merchandising companies report inventory as a current
    asset immediately below accounts receivable. Recall from Chapter 4 that com-
    panies generally list current asset items in the order of their closeness to cash

    You might also like